The stock market wealth effect is fueling a wave of early retirements
Yahoo Finance Video
Fri, August 14, 2026 at 2:29 AM GMT+5:30
Yahoo Finance Senior Columnist Kerry Hannon explains how a surging stock market and the resulting ‘wealth effect’ are encouraging older Americans (55+) to exit the workforce and retire earlier than expected
00:00Josh
That’s right, Carrie. So we have spent years talking about how Americans are delaying retirement, right? It’s inflation, it’s higher cost. You’re reporting now a soaring stock market could be pushing older Americans out of the workforce. What’s going on here, Carrie?
00:23Kerry
Yeah, absolutely, Josh. This is one segment of the population, 55 and older. and the participation rate, of course, plummeted uh during the pandemic. But this segment has never really uh sort of bounced back in the way other age groups have. But in the last couple of months it has even dropped off further. Now, there are plenty of factors why that could happen. You know, there’s health issues and there’s job losses and caregiving. You and I have talked about all of those things. But the puzzle is still there, why so many, why right now. And the economists over at Bank of America Security say they’d spent some time running the data and they said, you know what? We really see a wealth effect. We see that it’s related in some way to the, you know, more than 35% bump up in the S&P in the last two years and frankly, I I think I have this right since 2020, I think it has more than doubled. So there is a significant amount of wealth that older workers have accumulated and it just it appears to at least from this reporting in the economist data that one piece of this, one factor is the wealth effect as you said, and it just has given people an easier choice. It has given them options about when to step off the exit step onto that exit ramp that they may have been grappling with before. When they look at those bag those investment accounts in their 401k, they say, hey, maybe this is the right time.
02:18Josh
Do you think this is sort of a blip carry or no, this is like potentially a real durable shift?
02:27Kerry
Well, I think there’s it is fairly significant. Also when you consider that people do sort of taper off at this age at any rate, but but the actual numbers were something like in February of 2020, the labor force participation was about 40.3% for this age group. And uh in July of this year is 36.9. So it is definitely significant significantly down. It’s unlikely given the job market that it’s going to bounce back a lot more. and I think that is something to consider
